Millennials: The Language of Coffee and The Role of

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A Datassential study commissioned by S&D Coffee & Tea, Inc. ©2016 S&D Coffee, Inc. MILLENNIALS: The Language of Coffee & The Role of Sustainability

Transcript of Millennials: The Language of Coffee and The Role of

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A Datassential study commissioned by S&D Coffee & Tea, Inc.

©2016 S&D Coffee, Inc.

MILLENNIALS:The Language

of Coffee&

The Role ofSustainability

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This study endeavors to build upon previous research to further examine today’s young coffee drinkers. Specifically, we will focus on coffee- drinking Millennials (aged 18 to 34). The previous research sought to identify key differences between Millennial coffee drinkers and older, non-Millennial coffee drinkers. This study focuses in on how foodservice operators can take a more targeted and nuanced approach to communicating specifically with Millennial consumers.

So let’s recap why Millennials are so important. Coffee-drinking Millennials represent a vast array of untapped opportunities and have the potential to incorporate coffee as an integral part of their lifelong consumption patterns. We also learned from our original study that Millennials drink far more purchased out-of-home coffee as a group, and they have more widely varied coffee interests (far beyond just brewed drip coffee). They also spread their coffee dollars across multiple channels, engaging with a broad swath of the foodservice industry on a regular basis. Finally, they are both knowledgeable and engaged, more likely to consider themselves “coffee experts”. Understanding Millennials’ behaviors and desires can even start to open the window on insight into the next generation of future coffee drinkers.

THE MILLENNIAL

Copyright 2016. Trivinity, Inc. dba Datassential Research. All rights reserved. This document is proprietary and confidential and may not be disclosed in any manner, in whole or in part, to any third party without the express written consent of Datassential Research.

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ELEVATED NEEDS: These are higher level attributes that have real potential to elevate the coffee experience. It’s here where true optimization and differentiation can occur – especially when the focus is on coffee drinkers who are as sophisticated and emotionally engaged as Millennials.

ENHANCED NEEDS: These are the first indicators of a real focus on coffee beyond just offering it on the menu because patrons expect it to be available wherever they go. They are important and appreciated, but not necessarily ground breaking.

BASIC NEEDS: These are non-negotiable expectations. Neither do these items impress Millennial coffee drinkers, nor do they inspire them. In fact, the absence of these items is more likely to drive Millennials to purchase elsewhere. In today’s culture of oversharing and instant widespread communication, poor delivery on these is likely to result in an outsized negative impact on sales and consumer perception.

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In a nutshell…they are different. Millennials are less inclined to define “coffee” as just one thing (regular, drip coffee) and tend to use the term universally to encompass everything from regular coffee to espresso- based drinks and even cold or frozen coffee.

As such, the term “specialty coffee” doesn’t point to a single ingredient (espresso) or premium grade beans. Instead, it has evolved to represent high quality coffee drinks that are indulgent and often feature a special name.

WHAT WE LEARNED

ABOUT MILLENNIALS

1The language Millennials use and the attitudes they have indicate that they are deeply connected to coffee on an emotional level. For them, coffee is not just a drink, it’s an experience, so descriptors that are solely focused on the bean (such as “bold” or “Arabica”) or basic needs (such as “fresh” or “convenient”) only address one component of the picture for them.

Foodservice operators should consider the optimization of the coffee experience for Millennials from a more holistic standpoint.

To do this, we can approach the coffee experience by categorizing what’s important into a hierarchy of needs, from Basic Needs to Enhanced Needs, and finally to truly Elevated Needs.

ELEVATED NEEDS

ENHANCED NEEDS(meaningful additions like

expanded customization options, seasonal offerings, targeted

promotions, comfortable atmosphere)

BASIC NEEDS(cost-of-entry items like cleanliness, freshness, basic

customization, consistency, convenience, affordability, service)

MILLENNIAL COFFEE DRINKERS:

A HIERARCHY OF NEEDS

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2 A DATASSENTIAL STUDY COMMISSIONED BY S&D COFFEE & TEA, INC.

WHAT ARE THESE ELEVATED NEEDS?They generally encompass ideas that focus on the emotional side of things, a stark departure from Basic Needs, which are very much geared toward more practical aspects of the coffee experience. Elevated Needs include environmental sensitivity, sustainable sources, social consciousness, community focus, unique brands and innovative drink ingredients, trendiness and image enhancement.

While this class of needs may seem somewhat vague and ephemeral in nature, there are many concrete ways in which foodservice operators can leverage them in order to enhance their coffee programs.

For example, having a barista puts a human face to excellence in coffee and helps with trendiness and image enhancement, while third party certifications can lend credence to claims around environmental friendliness and sustainability. Using the right language and compelling terminology will help to more effectively communicate key criteria like freshness and quality.

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DO THEY REALLY MATTER?Offering Coffee That Addresses Elevated Needs Would Cause Millennials To:

Actually, they do. Elevated Needs are integrally linked with both Basic and Enhanced Needs. Successfully

delivering on Elevated Needs (via features like local, sustainable, fair-

trade certified, single origin, etc.) validates these other categories of

needs and increases believability in the coffee program overall.

More importantly, addressing Elevated Needs affects behavior.

Expect the place to have a high level of coffee expertise

Tell people about the place

Get coffee more often if they found places that offer it

Choose one place over another for coffee occasions

Actively seek out these places for coffee

Go out of their way to get coffee from these places

Choose one place over another for meal occasions

Additionally, addressing Elevated Needs has an impact that reaches far beyond just the coffee. It can influence attitudes and perceptions around an entire foodservice operation.

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Successful foodservice operators leverage their approach to Elevated Needs in support of a larger platform. In other words, it’s not enough to just add a descriptor to the menu or a label on the cup – Millennials are looking for a cohesive coffee program to deliver an optimized experience

However, claims around Elevated Needs are far less impactful on an individual or standalone basis. They are most effective when used collectively and in conjunction with the right combination of other purchase decision factors.

Components of the Millennial Coffee Purchase Decision

To start, 4-in-10 Millennials indicated that they would generally think more positively of places that offer coffee with features like local, sustainable, fair-trade certified, single origin, etc.

Here is a look at other, more specific areas of influence.

Places Offering Coffee That Features Elevated Needs…

Care about the environment and being “green”

Have high ethical business standards

Are socially responsible businesses

Pay their employees well (fair wages)

Offer high quality food and other beverages too

Are involved in their communities

Support/partner with local businesses in general

Have trendy/innovative/creative menu selections

Are upscale in general

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There are several “experiential contributors” that can be incorporated into an approach for the Elevated Needs of Millennials. In this section, we will conduct a deeper exploration of a few.

ADDRESSING ELEVATED

NEEDS2

CUSTOMIZATIONIt’s no surprise that customization options are appealing to Millennials, as this population has come of age in a world that is rapidly becoming a ‘made-to-order’ environment – in foodservice and beyond. So coffee is no exception. Actually, customization is such a critical component of the experience that it’s considered to be in the same tier as base fundamental requirements such as freshness and affordability.

There are infinite ways that operators can tackle this and there’s no single approach that’s definitively “right”, but the point is that at least some level of potential customization is required to truly engage with Millennials.

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THE BARISTABaristas offer credibility and are both

visible and audible indicators of a strong coffee program.

Baristas rank high in the order for quality cues:

2nd (out of 22)

5th (out of 22)

Moreover, Millennials find baristas to be a key component in validating descriptors focused on coffee preparation:

49%44%

Most closely associated with “gourmet / upscale coffee”

Most closely associated with “high quality coffee”

Agree that coffee must be poured and prepared by a barista or a coffee specialist, or it’s not truly “hand-crafted”

Agree that coffee must be poured and prepared by a barista or a coffee specialist, or it’s not truly “made-to-order”

ENHANCED BREW METHODSIn line with their higher levels of perceived coffee expertise, Millennials are increasingly seeking out interactions with varied and more sophisticated brew methods. Not only are these brew methods gaining in familiarity, but they are generally considered to be highly appealing – even to those who have yet to experience them first-hand.

Coffee Brew Methods: Familiarity Among Millennials

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WHAT’S DOABLE?It’s neither feasible nor expected that every purveyor of coffee can offer a bevy of complicated customization options or brew methods; it may be even less realistic for some operators to keep a barista on staff… and that’s ok.

As we mentioned previously, Millennials tend to spread their coffee dollars across a range of options and they don’t expect the same level or breadth of offerings everywhere they go. Delivering first on Basic Needs and then addressing a curated list of Enhanced and Elevated Needs that is tailored to include just those areas where operators can believably play given their capabilities is sufficient.

Merely making a single claim to address Elevated Needs is ineffective if unsupported – similarly, making several claims but mastering none is equally a wasted effort. Operators should identify specific areas where they feel confident they can succeed and then strive to exceed expectations on every front.

So what can foodservice operators work toward if baristas and an elaborate kitchen or condiment stations are out of the question?

Third party certifications are an easy way for coffee purveyors to build trust and substantiate claims around coffee using just a few words – especially handy for those operating without a lot of excess space on the menu board.

THIRD PARTY CERTIFICATIONThere are several organizations that provide coffee-focused certifications and enjoy high awareness by Millennial consumers.

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LANGUAGECoffee today is fraught with many descriptive terms and it’s difficult to know what language will effectively communicate the best of what a coffee program has to offer – especially to a Millennial audience who is accustomed to being inundated with excessive marketing language.

We asked Millennial coffee drinkers to reveal the extent to which specific terms have the potential to elevate perceptions and impact behavior.

Sustainable sourcing is a consistently powerful term whose influence extends

beyond just improved perceptions around an

operation’s coffee offerings. In fact, it directly impacts the bottom line; the vast majority of Millennials agree that they would be willing to pay a small

premium for coffee that is sustainably sourced.

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WHAT IS IT ABOUT SUSTAINABILITY THAT APPEALS TO MILLENNIALS?

Despite its powerful sway, “sustainability” is a term that is surprisingly murky in definition – only 22% of Millennials would say that they know exactly what it means and what’s required to qualify as such. More importantly though, the overwhelming majority (82%) have heard the term used in reference to coffee.

The fact that the use of this term can alter the consumption behavior of a sizeable portion of the target population despite a lack of clarity around its meaning really speaks to the strength of its potential.

SPOTLIGHT ON SUSTAINABILITY3

Organic, third party certifications, and environmentally-friendly practices are most tightly tied to ideas around sustainability, giving insight into its appeal.

Also, these links are notable because both organic and third-party certifications are defined in an “official” seeming capacity – something that’s lacking for sustainability. These terms seem to work together, with each validating and strengthening the other.

While many Millennials find themselves at a loss as to how

to define “sustainable”, they can clearly identify specific associations.

The wide range of associations reveals the breadth of benefits that “sustainable” can

bestow on a coffee program – it even generates perceptions of improved flavor and aroma.

Most Closely Associated with “Sustainable”

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There are many things that foodservice operators can tout in order to make Millennials feel good about patronizing their businesses, but environmental sensitivity and sustainability top the list – which is even more significant considering that the latter is largely defined by the former.

Moreover, though labor practices and more humanity-related factors like local harvesting are also associated with sustainability, these are less compelling to Millennials when it comes to coffee.

When we switched out “sustainable sourcing” for “ethical sourcing”, Millennials immediately understood this as a shift in perspective, going from a conversation about the environment to one about farmers and labor… and they chose “sustainable sourcing” as the most meaningful by a 2:1 ratio.

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SUSTAINABLE = “GREEN” = GOODThe heavy association of “sustainable” with environmental-friendliness is a key facet of its importance.

% of Millennials who would be more likely to choose a place like this for coffee

MOST MEANINGFUL FOR COFFEE

Ethical Sourcing

20%

Sustainable Sourcing

41%

Responsible Sourcing

39%

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SO WHAT?4

Sustainability is just one example of language that can help to address the Elevated Needs of Millennials. The spotlight on the term is meant to both demonstrate the power of compelling language and emphasizes the need for a nuanced approach to its use.

Additionally, we aim to highlight how entangled coffee terms have become, making it imperative to use them as part of a comprehensive program that delivers on Basic Needs first. A “sustainable” cup of coffee that is neither fresh nor convenient won’t pass muster. Likewise, “sustainable” coffee served in Styrofoam will be judged unfit. Use of coffee terms as mere labels will render them powerless to sharp-eyed Millennials who are increasingly skeptical of unsupported language.

SO NOW WHAT?Though language like “sustainable” and enhanced customization features or baristas are not new ideas, getting the combination right has been a challenge. Our goal is to provide some insight into how Millennials perceive these things in order to work toward a better solution for increased sales and visitation.

With their acceptance of a wide array of away-from-home coffee sources, Millennials have indicated that there is opportunity for operators of all shapes and sizes to flourish as long as communications are in their language.

TELL THEM (YOUR STORY), DON’T SELL THEMAll coffee has a potential story behind it… but not every story is a fit for all coffee. Millennials value authenticity, so use of terms like “sustainable” should be deliberate and in keeping with what they mean to Millennials specifically. An honest tale backed up by a quality product should do the trick.

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RESEARCH OVERVIEWStudy Purpose

The broad purpose of this study is to better understand coffee usage and attitudes among Millennials and further, to identify key whitespace growth opportunities for coffee operators therein.

Under commission of S&D Coffee, Datassential presents Young Coffee Drinkers II. This study incorporates consumer and industry research to address five key objectives:

1. Understand Millennial coffee consumption patterns and channel perceptions and track differences or similarities over time

2. Explore Millennial understanding of key nuanced attributes and familiarity with organizations like Rainforest Alliance, etc.

3. Determine magnitude of impact across nuanced attributes and dissect the components of a coffee purchase decision

4. Examine existing coffee programs to identify most impactful attributes and components

These objectives comprise the foundation for the research presented herein and provide context and insight for the various findings uncovered in the study.

Methodology

1. Consumer quantitative survey research: Online survey of 904 consumers

2. Participation requirements: a. This study was designed to capture a statistically significant sample of both Young Millennials (18 to 24) and Older Millennials (25 to 34). As such, all respondents were qualified as being between the ages of 18 and 34 as of the date of their participation. b. All respondents were also qualified as away-from-home coffee drinkers (including coffee beverages of any type) at a frequency of “once per month” or more often.

3. Survey fielded: August 2015

4. Resources outside of this survey utilized: Datassential MenuTrends™, Datassential BUZZ™ Coffee & Tea Tracker

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A Note on Statistical Reliability:

The 904 sample level corresponds with a maximum margin of error of +/- 3.3% at the 95% significance level; this means that in 95% of cases, any statistic reported for the full study sample of 904 respondents should deviate no more than 3.3% from those exhibited by the general consumer population. When cross-tabs are applied to the data, smaller sample sizes correspond with greater statistical error margins.

Note that throughout this report, statistical significance is calculated at the 95% significance level for each question where statistical significance highlighting is shown.

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General Data Sampling

Beyond the participation requirements outlined above, consumer study respondents were sampled to approximate the national US population based on core demographic criteria including: gender, household income, ethnicity, household size, and geographic region.

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For Inquiries contact Emily Tang

312-642-2573 [email protected]

For more information, contact your S&D Coffee & Tea sales representative.

800-933-2210 • www.sdcoffeetea.com

©2016 S&D Coffee, Inc.